GM gives Delphi `breathing room'

Price break means more time for unions

November 29, 2005|By Rick Popely, Tribune staff reporter

Seeking to avert a potentially crippling strike at its largest supplier, General Motors Corp. gave bankrupt Delphi Corp. a temporary price break Monday, and Delphi extended its deadline for reaching wage concessions with its unions.

Delphi had warned it would ask a bankruptcy judge to void its labor contracts Dec. 16 unless unions agreed to massive pay and benefits cuts. On Monday, the company said it would delay the filing at least five weeks to Jan. 20.

GM bought $15.4 billion in parts last year from Delphi, which filed for Chapter 11 bankruptcy protection on Oct. 8. The companies had agreed that GM would pay less this year for the same parts as part of its continuing relationship. Delphi said Monday that GM would temporarily forgo price cuts, but neither would discuss terms of the agreement.

"Directly, it has given us a bit of financial breathing room," Delphi Chief Executive Robert S. "Steve" Miller said in an interview. "It also gives us time to try to come to a consensual agreement with our unions outside of bankruptcy court."

The company has proposed cutting wages for United Auto Workers members to $12.50 an hour from about $27 and total compensation to $21.50 an hour from $65.

The UAW, which represents 24,000 Delphi workers, has rejected that, increasing the chance of strikes. Walkouts at a handful of Delphi plants could shut down GM, which counts on Delphi for key parts on virtually all its vehicles.

Miller discounted suggestions that GM's price concession will allow Delphi to increase its offer to the UAW and other unions. "I don't see how a delay by itself creates any money. The underlying economics are just as harsh and unforgiving," he said.

Delphi maintains that the wages and benefits it pays UAW members are three times that of other U.S. suppliers.

Miller said the announcement doesn't mean that Delphi is close to reaching an agreement with its unions.

"I wouldn't read that into it," he said. "There's still a long way to go before we will have a complete agreement."

In a statement, UAW President Ron Gettelfinger called the announcement "a positive sign" but added: "If Delphi is serious about restarting discussions, taking that insulting proposal off the table would be a good place to start."

Some analysts have dismissed a strike by Delphi workers as unlikely because it would idle UAW members at GM plants and could push GM toward bankruptcy.

But Commerzbank AG analyst Philip Watkins called a strike at Delphi "the most immediate problem" GM faces and says workers may not consider the big picture.

"I don't believe the local UAW officials would see it that way," Watkins said in a telephone interview from London. "They would be more interested in their local issues and would be more likely to pursue a strike. For GM, that would be catastrophic."

Before Delphi filed for Chapter 11, analysts estimated that a bailout by GM would cost the automaker $5 billion to $6 billion, but Watkins expects price breaks and other concessions GM may give Delphi "will cost considerably less."

Last week GM announced it would cut 30,000 union jobs and close nine assembly and parts plants over the next three years. Analysts were unimpressed, warning that GM still faced disruption of its parts supply from Delphi.

GM spokesman Jerry Dubrowski confirmed the agreement with Delphi to forgo price reductions next year but wouldn't discuss GM's motives. "Our goal all along has been to achieve an outcome that is in the best interests of General Motors," he said.